Professor Joanne Horton

Professor of Accounting

Joanne Horton joined the Business School here Exeter in October 2009. She was formerly a Senior Lecturer at the London School of Economics, in the Department of Accounting.

Joanne graduated with a PhD from the University of Wales, Aberystwyth, and went on to work for KPMG in London. She was also awarded a Research Fellowship by the Institute of Chartered Accountants in England and Wales. Joanne specialized in accounting for banks and insurance companies and has worked for the OECD in training former Soviet countries (e.g. Estonia, Latvia and Lithuania) in the art of insurance reporting.

Joanne has published extensively in leading academic journals and was recently commissioned by the Institute of Chartered Accountants in England and Wales on behalf of the EU Commission to investigate the impact of International Financial Reporting Standards on EU countries.

Joanne’s current research activity involves investigation of the effects of social networking on certain corporate governance mechanisms and corporate disclosure e.g. impact of networks on analysts forecast accuracy, impact of executive and non-executive connectedness on their remuneration package, and the impact of networks on corporation’s level of communication with the market.

Qualifications

Research clusters

Research interests

Issues relating to financial reporting

Financial institutions

Social Network Theory: Impacts on financial market participants

Social network research: A fundamental feature of today’s corporate world is the multi-layered network of connections among organisations; the medium through which resources such as information, funds and coordinated action are mobilised, transferred and shared. It would be virtually impossible for a corporation to operate effectively in isolation from numerous ‘network neighbours’, its supplier, investors, collaborating corporations, auditors, consultants, advisors and others. Arguably, the connections among organisations – their connectedness – are so vital to their functioning that it would not be accurate to say that corporations have networks. Instead, it would be much more accurate that corporations are networks. As such, Professor Horton’s research focuses on these very networks and attempts to offer a new conceptual lens through which corporate governance, e.g. financial reporting, transparency and regulation etc., can be examined and analysed and new insights can be developed.

Insurance reporting: Professor Horton has been investigating how the developments being adopted by listed UK proprietary life insurance companies, in providing experimental, supplementary ‘realistic reporting’, may be regarded as able to satisfy the likely criteria for an international standard for profit reporting in the primary financial statements, based on adoption of an alternative to the traditional, solvency-based, methods. IFRS 4 and FRS27 were issued in 2004 but did not materially alter the existing basis of profit measurement – this is now the objective for ‘Phase II’ on which IASB (supported by ASB) is still currently engaged. The research has involved a uniquely valuable collaboration between the academic researchers and firms representative of the two major professions that are involved in the development of reporting practice. Both the actuarial division of Deloitte (formerly B&W Deloitte, consulting actuaries) and the insurance division of KPMG have collaborated in the project and are contributing sponsorship to the CBP.

Key publications

Abstract:Career Concerns of Banking Analysts

We study how career concerns influence banking analysts’ forecasts. Banking analysts’ first (last) earnings forecast of the year is relatively more optimistic (pessimistic) for a bank that could be their future employer. This pattern is not observed when the same analysts forecast earnings of banks unlikely to be their future employer. We use the Global Settlement as an exogenous shock on career concerns and show that this forecast pattern is more pronounced after the Settlement. Moreover, we find evidence that analysts benefit from this behavior as analysts that are more biased in their forecasts of potential future employers are more likely to move to a higher reputation bank.

Abstract:Market Reaction and Valuation of IFRS Reconciliation Adjustments: First Evidence from the UK

We investigate the market reaction to, and the value-relevance of, information contained in the mandatory transitional documents required by International Financial Reporting Standards 1 (2005). We find significant negative abnormal returns for firms reporting negative earnings reconciliation. Although the informational content of the positive earnings adjustments is value-relevant before disclosure, for negative earnings adjustments it is value-relevant only after disclosure. This finding is consistent with managers delaying the communication of bad news until IFRS compliance. A finer model shows that adjustments attributed to impairment of goodwill, share-based payments, and deferred taxes are incrementally value-relevant but that only the impairment of goodwill and deferred taxes reveal new information. Our results indicate that mandatory IFRS adoption alters investors’ beliefs about stock prices.

Journal articles

Abstract:Career Concerns of Banking Analysts

We study how career concerns influence banking analysts’ forecasts. Banking analysts’ first (last) earnings forecast of the year is relatively more optimistic (pessimistic) for a bank that could be their future employer. This pattern is not observed when the same analysts forecast earnings of banks unlikely to be their future employer. We use the Global Settlement as an exogenous shock on career concerns and show that this forecast pattern is more pronounced after the Settlement. Moreover, we find evidence that analysts benefit from this behavior as analysts that are more biased in their forecasts of potential future employers are more likely to move to a higher reputation bank.

Abstract:Market Reaction and Valuation of IFRS Reconciliation Adjustments: First Evidence from the UK

We investigate the market reaction to, and the value-relevance of, information contained in the mandatory transitional documents required by International Financial Reporting Standards 1 (2005). We find significant negative abnormal returns for firms reporting negative earnings reconciliation. Although the informational content of the positive earnings adjustments is value-relevant before disclosure, for negative earnings adjustments it is value-relevant only after disclosure. This finding is consistent with managers delaying the communication of bad news until IFRS compliance. A finer model shows that adjustments attributed to impairment of goodwill, share-based payments, and deferred taxes are incrementally value-relevant but that only the impairment of goodwill and deferred taxes reveal new information. Our results indicate that mandatory IFRS adoption alters investors’ beliefs about stock prices.

Even under the International Financial Reporting Standard 4 (IFRS 4), the current accounting regime for UK life insurance companies is oriented towards delaying the recognition and distribution of profit, and still remains largely rooted in traditional requirements for statutory solvency reporting. This paper tests empirically the value relevance of the alternative 'realistic reporting regime' of voluntary embedded value (EV) disclosures that has been generally adopted by leading UK and Continental European insurers. In recent years, EVs have also been used internally (but not disclosed) by many US life insurers. The results found here are consistent with value relevance and some implications for standard-setters are explored.

Publications by year

2017

Abstract:Career Concerns of Banking Analysts

We study how career concerns influence banking analysts’ forecasts. Banking analysts’ first (last) earnings forecast of the year is relatively more optimistic (pessimistic) for a bank that could be their future employer. This pattern is not observed when the same analysts forecast earnings of banks unlikely to be their future employer. We use the Global Settlement as an exogenous shock on career concerns and show that this forecast pattern is more pronounced after the Settlement. Moreover, we find evidence that analysts benefit from this behavior as analysts that are more biased in their forecasts of potential future employers are more likely to move to a higher reputation bank.

2010

Abstract:Market Reaction and Valuation of IFRS Reconciliation Adjustments: First Evidence from the UK

We investigate the market reaction to, and the value-relevance of, information contained in the mandatory transitional documents required by International Financial Reporting Standards 1 (2005). We find significant negative abnormal returns for firms reporting negative earnings reconciliation. Although the informational content of the positive earnings adjustments is value-relevant before disclosure, for negative earnings adjustments it is value-relevant only after disclosure. This finding is consistent with managers delaying the communication of bad news until IFRS compliance. A finer model shows that adjustments attributed to impairment of goodwill, share-based payments, and deferred taxes are incrementally value-relevant but that only the impairment of goodwill and deferred taxes reveal new information. Our results indicate that mandatory IFRS adoption alters investors’ beliefs about stock prices.

Even under the International Financial Reporting Standard 4 (IFRS 4), the current accounting regime for UK life insurance companies is oriented towards delaying the recognition and distribution of profit, and still remains largely rooted in traditional requirements for statutory solvency reporting. This paper tests empirically the value relevance of the alternative 'realistic reporting regime' of voluntary embedded value (EV) disclosures that has been generally adopted by leading UK and Continental European insurers. In recent years, EVs have also been used internally (but not disclosed) by many US life insurers. The results found here are consistent with value relevance and some implications for standard-setters are explored.

External positions

Appointed External Examiner to Lancaster University (2009-2012)

LSE Senior Tutorial Fellow

Financial reporting: Theory and practice

The course focuses on inter alia: accounting practice and its relation to accounting theory. Conceptual frameworks for corporate financial accounting and reporting. Attempts to improve financial reporting by deriving accounting theories based on principles. Economic concepts of value, wealth and income and their accounting implications by reference to contemporary controversies including those relating to the valuation of liabilities and accounting for pensions.

After completing the course students should have an informed understanding of the way in which corporate reporting is currently changing in the UK and internationally, and of the context and manner in which accounting and reporting issues arise, are defined, are debated and are ‘resolved’ in official pronouncements; an insight into the theoretical and institutional reasons why so many of these issues remain controversial; and an appreciation of why dispute over these issues is not only technical interest to accountants and auditors but, more importantly, is of practical and economic significance to company managers, investors and investment analysts in preparing, using and appraising reports of corporate performance.